Iconic building at center of nasty real estate battle

The Empire State Building has made an impression on the New York skyline since its debut in 1931, but it also has also been at the center of a succession of battles for control.

The latest is playing out in court now, and could decide ownership of the 102-story tower.

On one side are New York real estate barons Peter L. Malkin and his son, Anthony E. Malkin. They are hoping to sell shares to the public in the building and 18 others valued at $5.2 billion.

The offering would value the Malkin family's stake at an estimated $730 million and install Anthony Malkin as chairman of a major new company, Empire State Realty Trust.

But an eclectic group of dissenters led by California businessman Richard Edelman and Andrew S. Penson oppose the deal. They argue it could harm the value of the investors' shares by exposing them to tax liabilities and stock market vagaries.

For more than a year, the Malkins have painstakingly persuaded 75 percent of the building's roughly 3,000 stakeholders to vote in favor of going public. But they need 80 percent.

The vote has turned ugly, too, and the hostility has shocked even longtime New York real estate observers.

The Malkins argue that the new company would provide a modern corporate structure and allow investors to buy and sell stakes more easily.

In the battle, the Malkins have accused Edelman and his followers of lying and spreading misinformation. Opposing investors have rallied opponents through a website.

In the beginning

The current dispute's foundation was laid in 1961, when Harry B. Helmsley -- the former owner of the Helmsley Sandcastle hotel on Lido Key -- and his partner, Lawrence A. Wien, bought control of the building. Peter Malkin, who was also involved, is Wien's son-in-law and Anthony Malkin is Wien's grandson.

To help finance the deal, the group sold 3,300 units at $10,000 a unit.

Edelman's grandfather, Max Edelman, was an escalator salesman in Brooklyn who routinely saved half his earnings. He bought 10 shares.

In 2011, the Helmsley estate decided to sell its stake, valued at around $1 billion.

The Malkins, in response, put together plans to form a real estate investment trust that would raise about $1 billion and buy Helmsley out.

But the Malkins' plan rankled some stakeholders.

Critics argued that the Empire State Building was far more valuable than the others tossed in. The Malkins' own projections show the Empire State Building's net operating income is expected to more than double by 2015.

"We know that it's going to be fabulously profitable in the coming years, according to their own documents," Edelman said. "Why should we sell it now?"

Others say the only clear winners from the offering as proposed will be the Malkins.

"It's obviously a good deal for the Malkins and the Helmsley estate, but that doesn't mean it's a good deal for the investor," said Ken Woolfe, a shareholder.

Anthony Malkin would become chairman of the company, with a $500,000 salary. But even bigger would be his family's stake,worth nearly $730 million.

"For the Malkins, this is a chance of a lifetime," said Andrew Shact, a tax lawyer who holds two shares with his sister and opposes the deal.

Building stakeholders led by Penson filed a lawsuit claiming the vote should be halted because a clause violates state law. That suit is snaking it way through the Manhattan court system now.

The rub is, once the Malkins achieve 80 percent approval, anyone who voted against it has 10 days to switch or they could receive only $100 per share. The offering values the shares at about $323,000 each. Opponents argue state law requires that "fair value" be paid.

For their part, The Malkins dismiss the lawsuit as a "publicity stunt," and contend that the provision prevents the "tyranny of the minority."